Research conducted by the NTSA in partnership with the Plan Sponsor Council of America (PSCA) examined the participation and savings rates of public education employees in more than 4,400 school districts across the country. Participation rates in 403(b) plans nationally average 27.13%, with an average district participation of 26.79%, and are low relative to corporate 401(k) plans for four main reasons:
1. in the corporate market, 401(k) plans are the primary retirement savings plan with no accompanying defined benefit savings program;
2. only 6% of school districts match participant contributions versus roughly 50% of corporate 401(k) plans;
3. very few school districts auto-enroll employees into 403(b) programs; and
4. two-thirds (66%) of school districts also offer employees a 457(b) savings plan alternative.
Monthly participant contributions into 403(b) plans average $322, or $3,864 per year (assuming that participants contribute throughout the summer months) with an average account of $42,885.56. Using the average teacher salary of $55,919, the contributions to 403(b) plans are roughly 6.9% of salary on average. As with corporate programs, the research did reveal that participation and contribution rates are positively correlated with salaries. States that have the highest average teacher salaries, such as New York, New Jersey and Connecticut, also have the highest participation and contribution rates.
The range of 403(b) plan participation rates in America’s public school districts is dramatic, suggesting that the investment and provider choices that each school district makes available to their employees, as well as the resources that they provide to help employees understand the benefits of participation, are key differences in driving participation rates. The survey revealed that participation rates for the 4,473 school districts in the survey range from less than 7.53% to more than 75.69%.
Editor’s Note: This is an occasional feature in the NTSA Advisor. This tip is taken from the 403(b) Plan Sponsor Guide, which is being made available to school districts nationally to assist them in understanding how to improve 403(b) plan participation and savings rates to help employees achieve a comfortable and timely retirement.
The 403(b) Plan Sponsor Guide is part of the content contained in the NTSA Certified Retirement Education Specialist (CRES) materials. The NTSA Certified Retirement Education Specialist (CRES) program and designation has been developed in order to equip advisors to be qualified and available to teach the NTSA educational program, which is designed to provide teachers with the basics of planning for retirement and improve their retirement readiness. More information about CRES is available here.
- Log in to post comments